Mortgage rates have typically fallen during recessionary periods. Douglas Rissing/Getty Images
In today's news cycle, recession headlines come and go. Amid trade war anxieties, stock market roller-coaster rides and global conflict, no one is hoping for a major economic setback -- except recessions have often created more favorable conditions for mortgage rates.
Since the beginning of 2025, average 30-year fixed mortgage rates have been stuck in the high 6.5% to 7% range. Most housing experts, myself included, aren't expecting rates to move much lower by the end of 2025.
What would cause mortgage rates to drop? Could buying a home become more affordable in a recession? Would a dramatic shock to the economy send rates down below 3%, as we saw during the pandemic?
Not necessarily. Having navigated the real estate market for over two decades, I've witnessed its highs and lows, including the 2008 seismic crash.
When my clients are financially ready to buy a home, I tell them that the market is just one piece of the puzzle. There's always an opportunity for certain homebuyers, and the current economic landscape could actually tip the scales in your favor.
Let's explore what a recession could mean for mortgage rates, home prices and your journey to homeownership.
Do mortgage rates drop in a recession?
During an economic downturn, mortgage rates tend to decrease for a few reasons. Market uncertainty can cause investors to seek the stability of government bonds, driving up bond prices and consequently lowering their yields (which are tied to interest rates).
Recessions also typically lead to less consumer spending and more job losses, which in turn reduces demand for mortgage loans. This decreased demand can cause lenders to reduce rates. Moreover, the Federal Reserve usually cuts its short-term interest rate during recessionary periods. Lower borrowing rates can help stimulate the economy by encouraging more households to spend and take out loans.
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